Solar Power

Solar Investments are Best Bet in Down Economy

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Lost your appetite for the stock market lately? If you find yourself looking for a better investment option in these unsavory economic times, you’re not alone.

The good news is that clean energy from the sun continues to flow freely toward planet earth, just waiting to be harvested to produce renewable energy and solid investment returns. If you have an 8 to 15-year time horizon in which you wish to grow your money, solar energy is a great opportunity.

Solar electric and solar hot water systems can be viewed as unique ‘investment vehicles.’ These renewable energy systems produce measurable ‘income’ because they reduce or eliminate fossil fuel energy costs. As energy costs escalate over time, the value of the energy savings (i.e. your income stream) increases.

Let’s say you want to reduce your oil consumption, and household carbon footprint, by installing a solar domestic hot water system. The installed cost for a system that will meet the demand of a 4-person household is roughly $11,000. The federal government provides a $2,000 tax credit incentive for you to do this project and the state of Maine provides a $1,000 rebate (unfortunately, this program is on a ‘lottery’ basis, so it is not guaranteed that you will receive the state rebate). In homes where an oil boiler is being used to produce domestic hot water, the savings from the solar hot water system average about 300 gallons annually while CO2 emissions are reduced by more than 5,000 lbs. per year.

If the system saves 300 gallons of oil at $3.00 per gallon, that’s $900 per year in fuel savings. If you finance the system installation with a home equity loan at 6%, the monthly loan payment is $57.31 and the loan cost per year is $687.77. Since you are saving about $900 in fuel costs per year, your investment is ‘cash flow positive’ from day one! Under this 20-year system loan scenario, the cumulative savings are nearly $30,000 at the end of the loan! We are not aware of any other home appliance investment you can make that will generate these kinds of returns.

Below is a spreadsheet that provides a snapshot of the economics of a solar hot water system financed with a 6% home equity loan.

Financials:

Cost of System or upgrade

$8,000

Loan interest rate

6%

Loan term

20

year

Federal income tax rate

34%

Energy Performance:

Expected annual fuel savings

300

G

Todays fuel cost

$3.00

$/Gall

Expected annual energy inflation

6%

Results:

Loan Cost per month

($57.31)

Loan Cost per year

($687.77)

Year

Savings

Annual loan cost pre tax

Loan interest paid

Annual cost after taxes

Net yearly savings

Total savings

1

$900

$688

$474

$527

$373

$373

2

$972

$688

$461

$531

$441

$814

3

$1,050

$688

$447

$536

$514

$1,328

4

$1,134

$688

$432

$541

$593

$1,921

5

$1,224

$688

$416

$546

$678

$2,600

6

$1,322

$688

$400

$552

$771

$3,370

7

$1,428

$688

$382

$558

$870

$4,240

8

$1,542

$688

$363

$564

$978

$5,218

9

$1,666

$688

$343

$571

$1,095

$6,313

10

$1,799

$688

$322

$578

$1,221

$7,534

11

$1,943

$688

$299

$586

$1,357

$8,891

12

$2,098

$688

$275

$594

$1,504

$10,395

13

$2,266

$688

$250

$603

$1,663

$12,059

14

$2,448

$688

$223

$612

$1,836

$13,894

15

$2,643

$688

$194

$622

$2,022

$15,916

16

$2,855

$688

$164

$632

$2,223

$18,139

17

$3,083

$688

$131

$643

$2,440

$20,579

18

$3,330

$688

$97

$655

$2,675

$23,254

19

$3,596

$688

$61

$667

$2,929

$26,183

20

$3,884

$688

$22

$680

$3,204

$29,387

Check out our newsletter next month for an economic analysis of a solar electricity investment.
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1 Comment

Jen I have shelled up a modest 500 square foot home. I’m undecided how to heat it. I would like to possibly go solar electric but am wondering if such a small place would be doable. Could you shed some light on the size and possible cost of an adequate system, give or take $500 to $1000 or so?

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Local solar experience you can trust: ReVision Energy is 100% employee owned and operated. Our team of in-house solar specialists (engineers, designers, installers) has built over 7,000 solar energy systems in the region. We're a Certified B Corp and have been consistently rated Top 10 Solar Installers in the Northeast.